Your Taxpayer Dollars At Work: San Fran Fed Asks If Structural Unemployment Is On The Rise, Discovers It Isn't

With unemployment stuck at 10% for about a year now, and with the real unemployment rate probably well over 20% if one removes all the BLS gimmicks, by now it is rather clear even to 2 year olds, that the New Abnormal is one where unemployment of 5% is merely a pipe dream, and that the Fed's attempt to revert to an abnormal mean, and blow the biggest bubble ever in the process, will do nothing to fix what is now a new structural baseline unemployment level. And yet, just to prove that the Fed will take taxpayer money and spend it on the most Captain Obvious topics ever, has just released a paper titled "Is Structural Unemployment on the Rise?" Adding insult to monetary injury, paper authors Rob Valetta and Katherine Kuang conclude that not only are worries about a "new normal" misplaced, but that jobs will promptly revert back to old levels. Sure, why not - as we showed previously, it will only take the creation of over 230,000 jobs a month for about 6 years straight to get back to the old unemployment level. It will also mean that luckily, at some point California will not have to borrow $40 million a day to fund its unemployment insurance payments. Lastly, with one brief paper the San Fran Fed has proven that all is good in the world, and those traitors responsible for 26 weeks of constant equity outflows, just like the 42 million Americans subsisting on food stamps, are complete morons for being "timid" in light of these stunning results. We expect as this paper's findings are broadly disseminated for world peace to finally break out, FX wars to end, consumer confidence to jump by 100%, and gold to drop to its Fed mandated price of $35/ounce.

From the paper's conclusion:

We examined evidence in favor of the view that structural unemployment and the NAIRU have increased during and after the recent recession. Based on historical patterns, the recent shift in the relationship between unemployment and vacancies reflected in the Beveridge curve is consistent with an increase in the NAIRU of about 1¼ percentage points or less. The impact of extended unemployment insurance benefits likely explains about 0.4 to 0.8 percentage point of this increase. The remainder is probably associated with the bursting of the residential real estate bubble and the need for many unemployed construction workers to find work in other sectors. The effects of both of these factors are likely to be transitory rather than permanent.

So let's get this straight: 4% of unemployment is due to "unemployed construction workers unable to find houses to build." Well, there you have it. The Fed has officially made the purpose of Zero Hedge's existence moot. Little did we know that all was in fact, well, and all it takes is the realization that Obama merely need to start building homes on the moon.

"The Federal Reserve will buy $110 billion a month in Treasuries, an amount that, annualized, represents the projected deficit of the federal government for next year. For the next eight months, the nation’s central bank will be monetizing the federal debt." and it's up to "The Fed is going out of its way to be a good citizen. It is time for the Congress to do the same."

I'll have to read the report but I'm pretty sure they are going to be using the past to predict the future ......... coming to the conclusion the future will revert to the past.........(This will show the stupidity of modern economic thinking at the FED and what they're teaching in economic doctoral studies........it also will show very clearly why we are in the trouble we're in)

The remainder is probably associated with the bursting of the residential real estate bubble and the need for many unemployed construction workers to find work in other sectors. The effects of both of these factors are likely to be transitory rather than permanent.

So coupled with the report that higher oil prices are actually good for the economy, we have demonstration that not only do they not know how to fix the economy, the don't even think anything is wrong. Solvency v. liquidity. They will continue to focus on liquidity and drive us all to hyper-inflation.

No, no, you misunderstand. Clearly any 'transitory' effect is irrelevant to experience; therefore, 4% of workers being unable to find work now (and being really poor) is irrelevant. In fact, life is irrelevant -- it too is transitory.

But in the long run, we're all dead, as ZH states. So what is left in between? Is all that is relevant the fact that 'money' exists, but that it is irrelevant who holds it?

paper authors Rob Valetta and Katherine Kuang conclude that not only are worries about a "new normal" misplaced, but that jobs will promptly revert back to old levels.Joseph Goebbels would be green with envy after reading this masterpiece...

Obviously I woke up in a parallel universe or dreamworld a couple of years ago where everything is backward. I'm a little pissed about the idiocracy and fraud but what really really pisses me off is that if this is the parallel universe why in the hell am I still not nailing Kate Beckinsale yet?

I was gonna type something about fed employees finding jobs in the bullshit shoveling sector but that reoccurring realization that the world is run by complete morons made me all woozy and I nearly vomited, so I typed about that instead.

San Fran ....is that where it's cool to get stoned for free in the At&t bleachers while 5-0 stands feet away....?? Pelosi the biggest export ?? Sanctuary city ?? 9th Circuit Court of Appeals ?? That San Fran Fed ??

Your Taxpayer Dollars At Work: San Fran Fed Asks If Structural Unemployment Is On The Rise, Discovers It Is!!!

The current economic recovery is proceeding at a tepid pace despite massive federal fiscal stimulus and extremely low interest rates. Forecasts derived from business cycle indicators produced by the Chicago and Philadelphia Federal Reserve Banks predict that real U.S. GDP growth through the first half of 2011 will remain at or below potential. If these forecasts prove accurate, then the historical relationship between real GDP growth and the labor market suggests that the unemployment rate could rise by as much as 0.5 percentage point during this period.

Recent weaker-than-expected economic data have raised concerns about the recovery’s staying power. In a recent Economic Letter, Berge and Jorda (2010) estimate the probability of falling back into recession during the next two years at around 50%. While discussions in the media often focus on the likelihood of a “double dip,” it is important to recognize that, even if the economy avoids another recession, future real GDP growth may not be strong enough to prevent the unemployment rate from rising. Standard macroeconomic models would predict an increase in the unemployment rate if real GDP growth over the next two to four quarters were to fall below the economy’s potential growth rate, defined as the sum of the long-run trend growth rates of productivity and the labor force. The Congressional Budget Office (CBO 2010) estimates that the U.S. economy’s potential annual growth rate over the next five years is 2.1%. Other estimates of potential growth are significantly higher. If real GDP growth were to fall below potential growth for a sustained period, then the unemployment rate would be expected to rise.